The Reasons For Asset Stripping And Performance

Corporate divestiture involves the transfer of a part of a firm's business to a new owner, as opposed to the sale of the entire firm. It has been used as a major form of corporate restructuring as important as corporate M&A. The quantities and value of such divestitures have been increasing both domestic and abroad. Contrary to M&A, either the academic or the business doesn't attach the same importance to divestitures. The literatures about corporate divestiture are much smaller than M&A. Now more and more domestic firms are dedicating to how to make themselves as large as possible, so it is likely not appropriate to the occasion. But this phenomenon frequently happens all over the world, and many excellent companies such as GE and VANKE achieve success through timely divestitures. "That existed is rational". Why firms frequently divest their assets? What is the consequence of corporate divestiture? Are the causes and consequence of corporate divestiture in China as same as in western countries? All of these questions are deserve to further investigate. Basing on prior researchers' theories and empirical models, using specific date and rich cases from Chinese security markets, I provide a numbers of empirical findings on the causes and consequence of divestitures by listed Chinese companies. Finally, some preliminary policy suggestions to governments and managers are given.More specifically, this dissertation is arranged in eight chapters. Each chapter's content is following:The first is introduction part, where I explained why I chose to make this research and what this dissertation's method and structure were.In chapter 1, I make a general review on the research literatures related to corporate divestiture. The foreign literatures have reached some conclusions such as the causes of corporate divestiture and the effects on the stock prices around the announcement of divestitures. Furthermore, some scholars study the use of proceeds from divestitures through the change of post-sale capital expenditures of divesting firms. Recent years some studies elaborate the Austrian interpretation of corporate divestitures as a challenge to the agency view of divestitures. However, such research is just at the rudimentary stage in China. What the empirical studies are scarcely make this dissertation have more realistic meanings.Chapter 2 provides a theoretical framework for this dissertation and introducesthe institutional background of corporate divestitures. I begin with three different types of theory to explain why firms divested their assets. Supplementing with some related laws and regulation codes for listed companies divesting in China, I analyze some important issues for this dissertation. At the end of this chapter, I gave a detailed explanation about my data source.Chapter 3 provides us a panorama of the listed Chinese companies' divestitures between 2001 and 2002. Moreover, I deeply analyze the type of divestitures which belongs to related trade. We can see that the related trade is apt to take place when the value of transaction is much higher. And this type of divestiture attaches more importance to the balance sheet than the actually operation.In Chapter 4, I make an empirical analysis on the causes of listed Chinese companies' divestiture. Firstly, I analyze the stated reasons by listed companies when they issue the divestment announcements. Secondly, I choose the sample of listed companies, which are matched with non-divestiture companies as controlled sample by industry, using two-digit SIC codes, and by size, using total assets. The methods include T test, non-parameter test and logistic regression model. In the end, I explored the determinants of the corporate divestiture decision of listed Chinese companies.Chapter 5 discusses the relationship between corporate divestiture and earning manipulation. Because it has been found that listed companies divest their assets so as to acquiring non-operational earnings in Chapter 4.1 test the foreign hypotheses about earning manipulation with Chinese m...